New Delhi, March 02, 2021: Virgin Atlantic Cargo adapted quickly to freight-only flying last year. Managing director Dominic Kennedy tells Damian Brett about the challenges it faced and the opportunites that lie ahead.
People often say they enjoy working in the air cargo industry because no two days are the same. However, when Virgin Atlantic Cargo managing director Dominic Kennedy joined the sector, he probably was not envisaging such a dramatic change as the aviation industry has been through over the last 12 months.
Kennedy studied geography at university and he says this, which gave him a fascination in the world around him, and a family member who was a pilot, led to an interest, and eventually a career, in aviation.
He started at Virgin Atlantic in 2005 before joining the cargo business three years later to help establish a centralised pricing function. He then took up a role in revenue management and ULD control before gaining a commercial director position and finally scooping the top job in 2017.
“I joined Virgin Atlantic not actually realising how significant cargo was, but as I was starting to look at route economics it became clear how important it was to the long-haul business,” Kennedy says.
“This is an industry that moves at a phenomenal pace and no day is the same. Whilst I came in not really understanding the size or intricacies of it, it is certainly pulsating through my veins and continues to do so.”
Running the numbers
At the start of the coronavirus outbreak, the Virgin Atlantic Cargo team faced the challenge of how to maintain services when passenger flights were being cut.
“We came into this crisis with about 10% of total turnover generated by the cargo business, so we were not insignificant to the economics of the airline, but we certainly had no idea that it would be conceivable that we could be flying without passengers on a cargo-only basis,” Kennedy explains.
“There was a weekend back in March [2020] where myself, most of the leadership team and a few other individuals across revenue management and sales were thinking how to solve the problem of keeping our aeroplanes flying without any passengers; what is the commercial model we need to put in place and what are the price points we need to put in place?
“Monday morning we came in and we started to put these incredible and fundamentally different propositions to our customers. Within the space of about 10 days we had already started to gain some momentum.”
Kennedy says the initial focus was on trade lanes where the cargo division had an established presence and operational infrastructure, such as New York JFK and Los Angeles.
From there, the carrier began to capitalise on opportunities as they presented themselves, for example starting a service into Chicago where it had an offline presence.
More recently, it added flights into Harstad/Narvik Airport to capitalise on demand for Norwegian seafood in North America.
Demand for “significant” shipments of personal protective equipment (PPE) from China also surged last year.
“We were engaging with — and still are to this day — the Department of Health and Social Care in the UK. We continue to operate charters on their behalf but at the peak [in June] we were operating about 17 flights a week from both Beijing and Shanghai.”
To meet demand, the Virgin team began to engage with OEMs and regulators on loading PPE cargo in the cabin.
“Loading into the cabin worked really well for PPE because of the benign nature of the boxes, the size and the weight, and where they were destined for,” says Kennedy.
“This all meant it was really worthwhile using that extra space, in some cases 80 cu m, that existed within the cabin.”
Kennedy adds that Virgin Atlantic’s aircraft are well suited to cargo-only operations.
“One of the things that is an advantage to us, and it also applies to some of our competitors, is that the composition of our fleet leans towards making this a success from a cargo-only perspective,” he says.
“The only aircraft we have operational at the moment are A350-1000s and B787-900s, which from a marginal-cost perspective are very efficient in terms of fuel burn, but more importantly the capability of those aeroplanes is phenomenal.
“We can conceivably put 50,000 kilos on an A350 and our max on a B787 is about 46,000 kilos — we don’t have any issues with weight and balance.
“When you have that sort of capability in the hold, sometimes complemented by the cabin for some of the PPE work, you become less susceptible to price than if you had a smaller gauge that wasn’t as capable.”
Kennedy also pays homage to the efforts of colleagues and partners over the last 12 months.
“It is a small team but everybody knows everybody and we are all very clear in what we are working towards.
“Our customers know this, our partners know this. We are very accessible and therefore we have been able to galvanise around this objective.
“We cannot thank our partners enough. In the UK, a huge call out for dnata who have been instrumental in our success, but it equally applies to WFS in Los Angeles, the Delta team at other points in the US, and Hactl and Pactl in Asia according to the reports published in aircargonews.net.
“Everybody has rallied around. It has put different pressure on that partnership network. In many cases we have had to think a little bit laterally about it. If you think about how you get cabin loads off an aeroplane, that infrastructure doesn’t really exist.”
As an example, Kennedy highlights how Virgin Atlantic’s cargo team worked with the passenger team, dnata and airline catering firm Gate Gourmet to use the latter’s catering carts to unload cargo from the cabin.
Overall, Kennedy says that last year was a record year for Virgin Atlantic Cargo in terms of revenues, with the business recording a 50% increase on the back of higher rates.
Cargo volumes were down last year, but this reflects the rest of the industry and is not too surprising when you consider the airline was flying around 600 services a month at the peak of last year — far below the number it would have registered in 2019.
Forward planning
While the cargo business has registered record revenues, the overall airline, like most passenger carriers, had a tough 12 months. Virgin Atlantic was forced to recapitalise and cut thousands of jobs.
Kennedy says the airline is still very much in survival mode but the cargo team has been focused on business.
He says: “From our perspective we were focused on running and growing our successful cargo-only operation.”
Looking to the coming year, the carrier had been hoping that passenger services would have slowly increased in the first part of 2021, but another lockdown slowed progress.
“We continue in the first quarter with the programme that we left 2020 with and, from a passenger perspective, we are anticipating and planning for a resumption of passenger demand during the course of 2021,” he says.
There has been much said about the boost that Covid-19 vaccine shipments could bring.
Virgin Atlantic Cargo is hoping to play its part and has developed its pharma service accordingly.
Kennedy explains that in the third quarter, the carrier’s life science team began to talk to customers and think about attributes that would be required to participate in the carriage of Covid-19 vaccines.
In November, the company launched a new product called Pharma Secure. The product includes a 24/7 support team, automatic live status updates, proactive service recovery and periodical integrity checks, temperature-controlled facilities and a dedicated booking team.
It also offers security escorts (on request), dedicated email for bookings, quotes and support, priority access to capacity and unloading at Heathrow, money back guarantee, GDP trained staff and access to temp-controlled facilities.
Kennedy points out that the airline has WDA accreditation in the UK, while partner airline Delta is CEIV certificated at JFK.
“We have been involved to some degree in some of the peripheral logistics of supporting Covid-19 vaccines, whether that be vials, ingredients and so and so forth,” says Kennedy.
“The amount of vaccine that is actually being flown, relative to the amount being trucked, is quite small.
“So for us we are gearing up for playing a part but anticipating that is really not going to happen until the middle part of 2021.”
He explains: “There is a huge amount of manufacturing capacity in the UK, Belgium, Germany and other places in Europe and most of the output of those manufacturing sites is for local consumption, it’s not for international consumption.
“But we do see a significant lack of production capability in places in Africa, Pakistan and large swathes of Southeast Asia. Once that local consumption has been satisfied, then you trigger the international need.”
Virgin Atlantic Cargo was also able to help with issues around the completion of the UK’s exit from the European Union at the start of the year.
In the middle of last year, the carrier introduced services to Brussels, Milan and Dublin.
Kennedy says there was a bump in demand on these flights at the end of last year and in early 2021 through a combination of French borders closing to the UK due to a new Covid-19 variant and certain trucking/parcel firms temporarily halting cross-channel services due to customs paperwork issues.
Even if no further cross-channel issues arise, Kennedy says Virgin’s intra-European flights have been performing well.
“We are at a point where a significant amount of the business we generate in Europe is now flying into the UK and not coming in on trucks in the way it used to. And if there is any further disruption, we will just add flow capacity to mitigate against it.”
The future for air cargo is uncertain, but having weathered the last 12 months — even making record profits in the process — it seems that the Virgin Atlantic Cargo team has the flexibility to adjust to whatever comes its way.
